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Senate Reaches Deal with Trump Administration on CARES Act

Since the COVID-19 (coronavirus) outbreak became a worldwide pandemic, the United States Congress and the Trump Administration have been working on multiple pieces of legislation to reduce the strain on the U.S. economy and aid state and local governments.

Negotiations in the Senate on a multi-trillion dollar stimulus package called the CARES Act (a description and copy of text was sent to TRALA members on Monday) were thought to be nearly finalized over the weekend until the Speaker of the House Nancy Pelosi (D-CA) announced late on Monday that she would not support the Senate bill and demanded a list of non-germane items be included in the stimulus package. This demand led to renewed negotiations in the Senate as well as the House of Representatives Democratic majority introducing their own coronavirus stimulus package which included several items that would have caused the entire process to slow if not end completely.

After further intense negotiations, early in the morning on March 25, 2020, Republican and Democratic leaders in the Senate announced that they had reached agreement on a new stimulus package, the bulk of which remains from the original CARES Act. Of importance to TRALA members include items that survived the final bill such as an increase in the interest deductibility limits from 30% to 50% of EBITDA, the repeal of Net Operating Loss limitations, and the modification to the loss limitation applicable to pass-through businesses and sole proprietors so those companies can utilize excess business losses and access critical cash flow to maintain operations and payroll for their employees.

Additionally, there are two separate loan guarantee programs included in the bill including $350 billion in loans for small businesses (500 employees or less) whose loans will be equal to 2 ½ months of payroll or $10 million. The loans will convert to grants if they are used to maintain employees and they will be provided through local and national lenders. Finally, there will be an additional $400 billion which will be used by the Federal Reserve to leverage up to $4 trillion in loans and loan guarantees to business. This money is separate from programs for airlines and critical infrastructure businesses.

The changes from the original CARES Act appear to be adding some additional layers of oversight and requirements to the business loan programs, an increase in unemployment insurance, and more revenue for state and local governments and health systems. A list of the changes to the CARES Act are listed below:

• Ban stock buybacks for the term of the gov't assistance plus 1 year on any company
• receiving a government loan from the bill
• Employment retention tied to federal loans
• Extended unemployment insurance and benefits of $600 per week for 4 months
• $150 billion for a state, tribal, and local coronavirus relief fund
• Additional $55 billion for healthcare system
• $10 billion for SBA emergency grants of up to $10,000
• Retention tax credit for employers keeping workers on the payroll
• A prohibition on funds or loans going to businesses controlled by the President, Vice President, Members of the Cabinet, and Members of Congress

The Senate is expected to pass this legislation today and then the House of Representatives is expected to pass this bill later in the day or possibly tomorrow before it will be sent to the President for his signature, likely late sometime tomorrow. TRALA has learned just in the past few hours that there are concerns by a handful of Republican Senators that some of the language could have unintended consequences to be interpreted that companies could be incentivized to fire employees which is clearly not the intent. Those concerns are expected to be addressed today.

Once the CARES Act has been agreed to by Congress and President Trump, TRALA expects a fourth coronavirus package to be considered in the coming weeks. This fourth package is expected to take longer to finish and be much more partisan due to the legislation recently introduced by Speaker Pelosi. Of interest to TRALA could be an infrastructure title in the fourth coronavirus package which could include a Federal Excise Tax (FET) holiday through the end of 2020 to increase the sale of heavy-duty trucks and trailers.

You may view a copy of the amended version of the CARES Act which TRALA has received from congressional staff by clicking here.